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Does secured debt have to be paid in Chapter 13?

Chapter 13 bankruptcy utilizes a repayment plan. As such, you're still going to be obligated to pay off a lot of what you owe. It's not a way to instantly eliminate the debt, but to make it manageable and affordable over time.

Secured debt is especially important, as the full value has to be paid over the course of the plan. Non-secured debt will have to be paid in part, but you typically just need to pay as much as the total calculated value of the nonexempt property that you own. The amount, of course, varies from one case to the next.

The difference between secured debt and non-secured debt is that secured debt is tied intrinsically to some item that you own. For instance, you may have bought a car for $40,000 and you still owe $30,000 on it. Other common sources of secured debt include homes, boats, and other such property.

The reason you need to pay this in full is because you're keeping these items when you file for bankruptcy. With other types of bankruptcy -- like Chapter 7 -- your assets will be liquidated. Chapter 13 does not use liquidation, though, so you are still expected to fulfill your obligation when it comes to paying off the collateral assets. You simply get a new plan that gives you a lump payment to make every month, and you slowly work your way through the restructured debt to eliminate it.

Before filing for bankruptcy in Georgia, you must consider which type will work best for you. Carefully consider your situation and the type of debt you have.

Source: FIndLaw, "Chapter 13 Bankruptcy Rules FAQ," accessed Sep. 20, 2016

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